Digia Q1'26: High-quality cash flow at a low price

Translation: Original published in Finnish on 4/30/2026 at 7:30 am EEST.

We reiterate our EUR 7.5 target price and Buy recommendation for Digia’s share. Digia's Q1 was slightly softer than we expected, but there was nothing dramatic behind the results. The big picture remains unchanged, and the company appears to be one of the sector’s winners and a long-term earnings growth engine. The stock's valuation (2026e P/E 9x and EV/EBIT 7x) is very attractive, especially considering the confidence in its earnings capacity, low risk profile, and a large share of recurring business.

Quarter slightly weaker than expected this time

Digia's Q1 revenue increased by 5% to 56.4 MEUR, which was below our expectations. Organic growth appears to have been 1%, higher than our forecast. Thus, revenue from Savangard, acquired in Poland, was significantly below our forecast relative to its size, contributing only 2 MEUR. Digia's adjusted EBITA decreased by 17% to 4.0 MEUR, falling short of our estimate of 5.1 MEUR. The adjusted EBITA-% was 7.1%, down from the comparison period and our estimate of 9%. The Q1 result included 0.7 MEUR in non-recurring costs from change negotiations conducted earlier in the year. Additionally, revenue and EBITA were impacted by 0.7 MEUR in expense provisions related to customer projects, and we did not adjust the result for this (adjusted for this, profitability would have exceeded 8%). The company also made investments in line with its strategy. However, the scale of these investments was apparently larger than we expected.

Capital Markets Day in May

During the 2026-2028 strategy period, the company aims to expand into a European trusted partner for intelligent business, both organically and through acquisitions. In the big picture, there are no major revisions to the strategy; it is an update to the previous one. AI has, of course, been brought more strongly into the strategy. The financial targets are otherwise the same (growth over 10% and EBITA% >12%), but the share of international business was raised as anticipated (to 30% of revenue). The new targets are attainable, but we believe the growth and internationalization targets require new acquisitions and support from a better market situation. The profitability target, in turn, still necessitates solid operational execution and success in productization and scalable solutions. On May 21, the company will hold a Capital Markets Day, during which it will present its updated strategy and provide a more detailed look at its business operations, the opportunities and impacts of artificial intelligence, and the market outlook.

Our estimates are at the lower limit of the guidance range

Digia's guidance for 2026 calls for revenue growth and an EBITA at or above the level of the comparison period. The changes to this year’s forecast are mainly due to a weaker-than-expected Q1. A potential "technical" challenge once again arises from the company's reporting practices, which do not adjust for costs such as those associated with change negotiations. On the other hand, the company had these costs last year, too (in Q2). We expect revenue to grow by 2% to 222 MEUR and reported EBITA to be 21.2 MEUR (2025: 21.3 MEUR). Digia has historically been active in M&As, and we expect it to continue pursuing inorganic growth when a suitable acquisition target is found.

Good cash flow at an attractive price

Digia has strengthened its profile as an earnings growth company and has risen to become one of the sector's top performers, which supports the share valuation. Based on the valuation methods we use, the stock is priced at least attractively (2026e P/E 9x, EV/EBIT 7x and expected return >15%) or even very attractively from all perspectives. Considering our DCF calculation (EUR 8.6) and the relative valuation level (~30% below peers), the share is very attractively priced. In addition, the company's risk profile is among the lowest in the sector. In summary, we see the fair value of the share in the range of EUR 7.2-8.6 per share.